According to Prof Jayati Ghosh, this is the greatest crisis experienced by the capitalist system; she lays out the direction of policy responses commensurate to what is needed.


JAYATI GHOSH: I don’t want to depress you all but this is going to have an impact that’s nothing like anything we have seen – not the Great Financial Crisis, not the Great Depression, not even the two World Wars. We are already going to be in an economic situation that is probably worse than all of these in terms of the massive global destruction of livelihoods and breaking of supply chains. So what do we do?

LYNN FRIES: That opening clip was of Jayati Ghosh commenting on the impact of a situation that in her view has no comparison to anything in the history of global capitalism – the economic situation unfolding from the Covid-19 crisis. Speaking to progressives around the world, Ghosh lays out a policy agenda for a way forward. Her comments were part a webinar hosted by the Transnational Institute. This newsdoc showcases those comments. I’m Lynn Fries and this is Global Political Economy or GPEnewsdocs.  Jayati Ghosh is an award-winning economist and Professor of Economics at Jawaharlal Nehru University in New Delhi.

JAYATI GHOSH: I want to go straight into it. And I just wanted to remind everybody that what we are going through is actually unprecedented. Of course, there are many things we do not know. There are many uncertainties about the severity, the spread, the extent, the timing of this disease. But even before that, we already know that the economic impact is going to be devastating. Indeed, it already is devastating simply because of the nature of the public response. The lockdowns that we have seen are again unprecedented. This has never happened in the global economy that we have simultaneously shut down large parts of the world economy at once. And this has huge implications.

We are not just shutting down demand. We are not just throwing people out of livelihoods, forcing them not to work, not to get their wages – in most parts of the developing world they are simply not getting wages or incomes over this period – not to be able to sell their products. We’re closing down all of that side and therefore reducing incomes but at the same time we are reducing supply. We’re breaking supply chains. We’re making it harder to distribute. We’re going to face, quite soon in many countries, shortages of necessities not just food and essential drugs but a whole range of others.

So this is genuinely unprecedented. There is no comparison to anything that has ever happened globally in history – in the history of global capitalism – for sure. Now in that, in fact, the other aspect which is already becoming clear is that this is dramatically increasing inequalities. Existing inequalities which were already at their peak – we thought just before the crisis – are now being hugely exacerbated. Cross country inequality – global power is asserting itself in the most unpleasant ways and we’re seeing that – and within country inequalities. Because as usual the most marginal, the least protected workers are the ones who are directly affected. And those who have salaries, et cetera, who live on rentier income, are still managing reasonably well given the lockdowns.

So in this unprecedented situation, the developing countries are the worst hit and this has happened through a variety of ways. It’s happened, of course, through global trade. Exports have collapsed. They don’t exist. When countries themselves are in lockdown the range of exports you can produce and the volume obviously has collapsed. But exports of services are hugely affected. Travel, transport everybody’s aware of that, tourism all of those have gone completely, they just stopped, but a range of other things. In other words, we now have a cessation of economic activity globally which has meant that the balance of payments of developing countries has gone for a complete toss. And the chances of that reviving very soon are very low because from this we’re going to have negative multiplier effects. In other words, the loss of income – the loss of demand – is going to persist because it will feed into further loss of income as we grow over time. And so this is going to get worse and worse in the near future.

In addition to that, we have massive bad news on the capital account which is to say we’ve already had flights of capital from all the emerging markets. It’s typical. Even though the United States is the worst hit country with the largest number of cases [Covid-19], capital moves to the United States. The flight to safety and so all of us have experienced huge outflows of portfolio capital, which have affected our stock markets, which have affected financial conditions within the country. External debt is becoming a massive problem. We were actually at a peak already in terms of debt to GDP ratios globally, in the US, but also among developing countries – Asia, Latin America, Africa – we had really expanded our borrowing. And a lot of that borrowing was very volatile. It was not just public borrowing from the multilateral institutions. A lot of it was, in fact, short-term commercial borrowing and borrowing in the bond markets. Now, these are notoriously volatile. And of course they have been volatile and so we are finding that, first of all, the bond markets have collapsed in most emerging markets. And secondly, that it’s harder and harder to service the external debt that we do have simply because our currencies have depreciated so rapidly in the last one week or so.  All of this basically means that developing countries are given a double whammy.

And then of course, our policies of lockdown are hugely creating inequalities within our countries. I mean, India is a classic example. We’ve had the most draconian, I would say even cruel lockdown. Ninety percent of our workers are informal. They have basically been thrown out without any recourse because there’s almost no social protection. Many of them do not have food for the next week, even 40% – a recent survey has found – for the next day. And there’s very little public response in terms of making sure that there’s enough food and making sure that they have enough incomes to survive even during the period of the lockdown. So within countries there are these huge issues as well.

So we are seeing and I don’t want to depress you all but this is going to have an impact that’s nothing like anything we have seen – not the Great Financial Crisis, not the Great Depression, not even the two World Wars. We are already going to be in an economic situation that is probably worse than all of these in terms of the massive global destruction of livelihoods and breaking of supply chains. So what do we do?

Now if it just such a globally unprecedented challenge, we have to have a global unprecedented response. And I think that’s very important for us to recognize. We can’t think small. We can’t tinker. We have to have big, big gestures but we also have to have them quickly. Now that’s a contradiction because we know that, first of all, we have still a global economy that is controlled by neoliberal finance and these global institutions have shown very little capacity for that kind of vision. We also have the leader of the so-called world, Mr. Trump, engaging in the most nationalistic kinds of responses. And so the chances of global cooperation also looked very, very limited. But on the other hand, we’re also seeing a recognition that – yes, public health spending is important. That maybe it was a mistake to privatize and to reduce government spending on essential health. And that maybe in fact, if you do not look after the health of the poorest person, you yourself can be in danger among the elites. And that recognition may well lead to an increase in more government health spending.

But on the other hand, we need much more. Especially if we’re going to save the whole of the developing world from this huge economic calamity that is likely to befall us. So we need to make some demands of the global community immediately. And many of these are for me second best solutions because some of them necessarily involve the role of the IMF. This is not an institution I have much respect for. This is not an institution that has proved its worth over its history at any point. Nonetheless, we cannot sit around and try and create another institution right now.

The IMF has the mandate to create global liquidity. Right now we need a massive increase in global liquidity available to every country, so we need at least $1 trillion, maybe $1.5 trillion increase in SDRs. Special Drawing Rights are assets that the IMF creates. It has the power to create them. Every country gets them according to its share of the IMF quota. There are no conditionalities attached when you simply issue new SDRs. And so the IMF cannot say: well, I’ll only give you this much if you behave and you do the following conditions. It has to give every country it according to its share of quota. Most rich countries don’t need it. But for developing countries, it can be a lifeline. So that’s one very important immediate measure. We also need immediately a debt moratorium. Most of the debts of the developing world are currently unpayable. They’re not going to get paid. So we need to have three month maybe six month moratorium immediately on all debt payments without interest payments being added. And that in turn means that after that we will then think about debt relief. About actually restructuring all the debt packages which has to happen because those debts will still be unpayable six months down the road. So we have to restructure all of those eventually and that definitely has to be a very important part of our demand as well.

Developing countries have to institute capital controls. Our currencies have depreciated by 10% to 20% maybe 30% in some cases, in the last one month. We have to stop this bleeding. We have to ensure that capital cannot just move in and out whimsically. So, all developing countries have to be allowed to institute capital controls as quickly as possible and in a coordinated way so that they’re not singled out by other countries and by mobile finance.

Now, one of the things this crisis is going to force governments to do is to reconsider the role of planning because it is simultaneously a demand crisis and a supply crisis because we have stopped production. We have broken supply chains. If we even want to bring back the production and distribution of essentials, we will have to do some planning. Because even food and medicines – as the basic essentials – they have input and output relationships. You have to make sure they’ve got all the linkages. For that, you cannot do this without planning, without coordination. And States that had forgotten all about it have to bring it back. So planning is essential.

The localization of production is going to become another big thing because this has shown not just the perils but the stupidities of globalization. The idea that you can produce fish in the North Sea which is then processed in Southeast Asia and sent it back for consumption in Europe. That kind of nonsense has to end. And so more emphasis on local production, local consumption in a sustainable, viable way for a whole range of commodities.

And as I mentioned, the recognition of public goods like health which has completely gone from our discourse. This is absolutely essential, massive spending on public health and dignity to health workers – protection and dignity – to health workers. These all have to be part of our policy agenda.

Now, these are our big asks, but they’re not entirely ridiculous asks because people are learning. Things have changed and the world that we will wake up to when this crisis is finally dealt with will inevitably be a different world. We have to make sure that it doesn’t stay the same in terms of the power imbalances that have generated this crisis in the first place. I think I’ll stop here and we can get responses which I’m waiting to hear…

…Amazing questions and discussion here so I will not be able to do justice to all of it but I do just want to pick up on a couple of them that were already raised before coming to this very big and broad one [What political leverage is there for the policies you outlined given existing power structures?]. So listen, let’s remember this is a big crisis but the problem with capitalist crises is that they affect workers, peasants and women most. So this is going to be very, very bad news for all of the people who we feel that we are in solidarity with. And their bargaining power will be worse. Their conditions will be worse. As Walden [Walden Bello] said, States are going to use this opportunity to increase monitoring, surveillance, centralized control. They’re already doing it. They have tasted blood and it’s going to get worse. So let’s not kid ourselves that this is going to be a very bad time. And it’s not that because capitalism has exposed itself, which it did it earlier as well, that suddenly everyone’s going to say – oh fine, let’s now think of doing something else. It’s not going to be that way. Structures of power are still not, in that sense, dramatically affected. And as Quinn [Quinn Slobodian] said, you know, we are not able to capture the narrative or even to capture the popular imagination in a way sufficiently to actually do the kinds of things we want. That doesn’t mean that we have to just all, you know, go home and go to bed and forget about it because it’s too desperate to think about. No, it doesn’t mean that.

Because since it just so unprecedented, since this is a global crisis of a magnitude that is beyond description, we are going to get outcomes that we cannot yet anticipate. Now, some of these outcomes can be horrible. I think a number of the questions raised the possibility of war. And I think we have to recognize it’s there, very much. I mean


the kinds of leadership we have globally unfortunately the possibilities of war in a time like this are quite real. And it could even be at the end of all this, you know, a war over medicine, a war over something else or just a way to mobilize your population against some other rather than against yourself. And so all of these are very much on the cards, we can’t pretend that these are not possibilities.

That’s the first point. The second is the whole issue about whether we are all being very reformist rather than revolutionary or just at least much more transformative. And yes, there is this problem. But let’s think of it this way. I agree with Lebohang [Lebohang Liepollo Pheko] that our response has got to be socialist, feminist and ecologically conscious. Yes. But it also has to be recognizing the realities that we’re faced with right now globally. And what can be done immediately. Because we are talking about immense human suffering that is going to happen. And I repeat 2008 was a walk in the park compared to what we’re going to see after this. And this is independent of whether some medicine is found, a vaccine is found for the virus and it’s contained and all that. All of which, we don’t know. But independent of that, we have already created this huge economic disaster.

Gabriella asked a very good question, why did everybody do this lockdown? Good question. I don’t know. I don’t want to do conspiracy theory about this but really it is an extraordinary response to what was still a relatively small public health emergency. So it’s another thing that deserves more discussion. But, yes absolutely. Now in that situation we have to think long term, we have to have a long term perspective but we need immediate responses. So the immediate responses have to include some of the things I mentioned.

Lots of questions on the SDR [Special Drawing Rights]. I think we need to just clarify. SDRs do not require an increase in the capital base of the IMF. SDRs are global liquidity that can be created. Okay. And which do not have to be based on a dollar [USD]. They do not. There is no commodity base. And there is no currency base to the SDR. It’s a unit of account. Every country, every member country simply has them in the IMF and they can exchange them. So yes, if there were well meaning rich countries, they could donate SDRs to developing countries. It’s never happened so far, but who knows if that‘s going to happen? The point is if you get an allocation of SDRs, the rich countries may not use them, they would just lie there. But at least developing countries have some foreign exchange because the debt moratorium, which is essential, is still not going to be enough. All your foreign exchange earnings have collapsed. Developing countries have got no foreign exchange access at the moment and capital is leaving. So you put capital controls to prevent capital leaving but you still don’t have enough foreign exchange. You need something to get the minimum imports for your people. And most developing countries have a lot of necessary imports. So these are all things we need just to prevent greater disaster, greater human catastrophe, happening in our countries. I would say. These are not going to transform the system. These are not transformative. What’s transformative is we have to bring in both the green elements. By which I mean the emphasis on an ecologically viable method of human existence – which we have lost completely and I agree with LeBohang [Lebohang Liepollo Pheko] completely, GDP is a disastrous indicator – but we need to bring that in. And we need to bring in care and the recognition of care work – paid, unpaid, underpaid, et cetera – as a critical part of that future.

So I would say that our broader response, what I’ve outlined was the first immediate, how do we cope with this huge human disaster? And then of course, there will be national policies of coping and minimizing the damage that is going to happen. But we must for the future bring in greater social recognition of the huge human and material significance of care.  And maybe this pandemic will do a little bit of that. Because in fact the combination of the significance of health workers and the lockdown’s impact on realizing how much everybody relies on care work in different ways in their lives might have an impact socially. And we need to combine that in our responses and emphasize those issues – in terms of whether it’s domestic workers, whether it’s nurses, whether it’s all kinds of health workers at the front lines, nutrition workers, therapists, et cetera – bring in the significance of care.

There was a question about whether global supply chains are going to be…the fact that,  we are saying we have to move away from some of these crazy global supply chains, that will impact on workers in the South. Yes, but listen, workers in the South are going to be horribly impacted every which way you look. Their recovery is not going to happen by pleading to get back into some global supply chain. Their recovery will happen if every country enforces employment policies of its own. It will have to be based on that. Which prioritize not just local demand, but regional demand, regional cooperation is a very important element of this. And care work, which we massively under provide across the world, can be a huge means of actually delivering employment and a better quality of life.

I’m going on too long, but I will stop soon. There’s just another final point, I want to make. And that was a very deep and fundamental question. That we all have got horrible leadership, or maybe not all but most of us, have got really bad leadership. Okay. Certainly in India, I don’t even want to begin about talking about it. But in many of our countries, we do not have governments that are going to even negotiate for the kinds of things that we are asking for. Walden [Walden Bello] was absolutely right therefore civil society has to be involved. On the other hand, we know civil society isn’t involved in these negotiations. It doesn’t work that way, right? We can say what we like. Nobody listens. They go and have their meetings often in secret and then they come back with a particular package that all of us have to deal with.

In this reality, how do we change it? And how do we create enough public opinion within our countries and globally that, in fact, governments are forced to respond? And I think this is where…you know what Quinn [Quinn Slobodan] said is absolutely right – that COVID is not going to do this for us. Right? COVID is creating a crisis in which, let’s face it, all of the left constituency is going to be decimated. And therefore, the left itself is going to be much weaker. How do we revive the left agenda in that situation is essentially by capturing the imagination. And so he said, we need a global…I don’t know if we need a global one, maybe we do need a global one but I don’t think we need a global. We need in every country to actually have a few of these significant one or two things that actually captures people’s imagination.

And in India, you know I mean, in India recently, there’s been this huge thing where religious polarization has become the basis. To the point where, we have even communalized/polarized COVID, we’ve started blaming minorities for COVID and so on. Okay. So we’ve had a really bad situation in terms of the State’s ability to divert attention to other issues. But something like this brings you back to the basics – to your access to food, to a livelihood, to a minimal capacity to live in decent conditions. And those will then – I think people will   start demanding of their conditions and of the State that they should be allowed to live in those. If we can capture a few demands that States would find it impossible not to address, if you see what I mean, in our countries. And then insist on a global context which enables those countries to achieve those demands. I think that would be the way forward.

FRIES:  That was Jayati Ghosh contributing to a webinar hosted by the Transnational Institute. The full webinar can be viewed on TNI’s YouTube channel. Many thanks to all the contributors and participants of the webinar and to Transnational Institute, the organizer and thank you for joining us. From Geneva, Switzerland this has been news and analysis of the global political economy by GPEnewsdocs.


Jayati Ghosh is Professor of Economics at Jawaharlal Nehru University in New Delhi, Executive Secretary of International Development Economics Associates. Professor Ghosh is co-recipient of the International Labour Organisation’s 2010 Decent Work Research prize and a member of the Independent Commission for the Reform of International Corporate Taxation.


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  1. I just discovered a link to this site on the digger blog , I was wondering what had happened to Paul Jay after he disappeared from TRNN ? As to this article i disagree with the authors belief in taking for granted view that covid is a deadly pandemic , but agree with much of what see says about its effect on politics and economic s Ms Thatchers TINA come to fruition?

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